A peer-to-peer electronic system in order to transfer and store value said the WhitePaper. Appearances are deceptive and the definition of Bitcoin is not as simple as it seems. Bitcoins are sent or received, this is known as a transaction. Transactions need to be confirmed and validated in order to facilitate their addition in the current Blockchain, which is done by some of the nodes of the network itself, who are known as miners. They take a set of unconfirmed transactions and add it to the network after verifying them. The verification of the transactions requires the computing power. Hence, as the Blockchain Network increases in its size, the difficulty of verifying the transactions and adding to the blockchain also increases which has led them to use complex and expensive mining equipment specifically designed for such purposes.
If someone wishes to earn Bitcoins by mining them, it can be done in two ways. Mining Bitcoins personally by purchasing a whole set of mining equipment or simply joining a Cloud Mining pool without purchasing any equipment. There are a number of advantages and disadvantages associated with both the choices.
If a particular user opts out, to mine Bitcoins personally, then he needs to care for the mining equipment and all the maintenance issues that are related to it. This method will cause inconvenience to the all the other miners, as it will result in the addition of a new miner to the network, which will automatically increase the difficulty of solving the complex mathematical algorithm. But the advantage here is that the whole Bitcoin reward which the miner gets can be used completely for himself without sharing it with anyone.
On the other hand, if one chooses to join a Bitcoin mining pool by paying some amount of subscription fee then he doesn’t need to worry about the mining equipment at all. All the mining procedures and complexities are taken care of by the mining pool itself but only a share of the reward is credited to the Bitcoin wallet, constantly, depending on the subscription. This method is better, as the complexity of the mathematical problem is constant, as no new minor has directly joined the network. But due to the monopoly in the mining industry, by some of the mining pools, is proving to be a threat to the decentralized nature. Nevertheless, both the choices entice their set of consequences.
Setting up a Bitcoin miner is challenging task. One needs to consider a lot of factors before purchasing the Bitcoin mining equipment. The cost, hashrate, as well as the efficiency of a Bitcoin mining rig, must be taken into account prior to its purchase. Hash rate is nothing but the number of guesses or hashes per second, the equipment is capable of. As it is all about earning Bitcoins and indirectly incur profits, the cost of the mining rigs must be feasible enough. The amount of electricity that the mining rig consumes and the specific amount of Bitcoins it is capable of mining per month must be taken into consideration in order to calculate the efficiency of the mining.
During the initial days of the Bitcoin mining, normal GPUs ( 800 MH/s ) and, to some extent, CPUs ( less than 10 MH/s ) were sufficient in order to verify the transactions by the miner. But since 2017 after the widespread adoption of Bitcoin and exponential growth in its Blockchain network, these equipments have become obsolete. The Field Programmable Gate Arrays (FPGA, 750MH/s) were then used for mining. It is nothing but a customizable integrated circuit on which large volumes of processing chips can be attached for Brute-Force computations. Following which the most advanced Bitcoin miners known as ASIC miners were introduced with the computational powers in gigahashes as well as terahashes per second. Along with the mining equipment the respective power supply needs to be purchased.
After the purchase of the mining equipment, prior to initiating the mining process, one needs to provide the Bitcoin wallet address in order to store the Bitcoins mined. Having a two-factor authentication for the wallet as well as storing it offline in a Pendrive is highly preferred.
The confusion at this point is surely arising, when one is mining Bitcoins personally then why does he or she need to join a Bitcoin mining pool? Mining Bitcoins solely, is literally of no use, as it does not lead to any profits at all and the mining equipment brings nothing but an electricity bill. Hence it is always preferred to join a mining pool and get the respective amount of reward based on your contribution to mining. Bitmain is regarded as one of the biggest mining pools in the world.